SOX and Dodd-Frank Act：Implications for executive compensation in the banking and insurance sectors

• Main Authors: Lo, Wen-Yuan, 羅文遠
• Other Authors: Wang, Sue-Fung
• Format: Others
• Language: en_US
• Published: 2014
• Online Access: http://ndltd.ncl.edu.tw/handle/56276094271123644004

碩士 === 國立交通大學 === 財務金融研究所 === 102 === This paper investigates whether there are any effects for SOX and Dodd-Frank Act on CEO compensation in banking and insurance sectors. Although, SOX focused on reforms for corporate governance and internal control, executive compensation was partly regulated by the law. Dodd-Frank Act required the financial institutions to follow a large number of disclosure rules to eliminate CEO’s high risk exposure. The passage of laws will affect CEO’s decisions and thus the firm performance. Based on pay for performance, executive compensation will be affected. We find that there will be declines of risky investment by CEOs and firm performance and thus decreases of variable compensation after the passage of SOX and Dodd-Frank Act. Firms will tend to give CEOs more fixed compensation to compensate the decreasing variable compensation in the post-SOX and Dodd-Frank periods. Further, Firms of bigger size and higher percentage of variable pay will be more significantly affected after the passage of two enacted laws.